Australian real estate market scene went through a 180-degree flip in just a year. During early summer of last year, quite a number of Australian capital cities waved through high house prices with the end seemingly not in sight. However, Sydney and Melbourne, the two culprit cities behind the country's booming price growth, are now past their cyclic price peak and seem to be headed to a cooling off after an overheated couple of years, news.com.au reports.
Tim Lawless, head research of CoreLogic RP Data, says that there was an evident slow in market conditions for both cities earlier in the year which sustained throughout November. Over the month, Sydney and Melbourne experienced fall in home price values by 1.4% and 3.5% respectively.
The trend was also felt across other cities in the country. Hobart had a drop of 2.4%, Darwin values dipped 1.3% and Canberra's was down by 0.5 percent.
All in all, dwelling values dropped by 1.5% in the last month according to the combined capital housing index by CoreLogic RP Data.
But bucking the national trend, there are actually cities that experienced price growth over the same period. Adelaide, which has the highest month-on-month growth, price grew at 0.7%. Brisbane had a humble increase of 0.6% and Perth experienced a slight growth of 0.3%.
"The latest results are now placing downwards pressure on the annual change in dwelling values. The annual rate of growth across the combined capitals index peaked at 11.5 per cent back in April 2014, and has since reduced to 8.7 per cent," Mr Lawless said.
However, bargain hunters in Sydney and Melbourne may need to hold their breath as decrease in monthly price growth doesn't exactly equate to imminent price crash.
Lawless adds that the market slowdown in November resulted from the increasing mortgage rate independent of the RBA cash rate, and stricter lending practices that slowed down investor interests.
The decreasing house values will sure be a hot topic in RBA's last gathering for this year, he says.
"A less buoyant housing market is likely to provide the Reserve Bank with a greater degree of flexibility in adjusting interest rates without as much risk of overstimulating the housing market," Mr Lawless said.
"While the Reserve Bank is likely to welcome a slowdown in the rate of home value appreciation, the overriding objective would be to avoid a significant downturn in the housing market, which would act as a weight on economic growth and potentially impact financial system stability," he said.
However, he pointed out that attention may shift on the large number of under construction dwellings, as well as an increased level of settlement risk for off-the-plan purchases.
"Those purchasers who have recently purchased off the plan may face challenges at the time of settlement if the valuation of the property is lower than the contracted price, or if mortgage finance is less freely available, or on more expensive terms. This would imply that some buyers may have a higher loan-to-valuation ratio (LVR) than anticipated, which could require additional funds to bring the LVR down to a level the lender is comfortable with."
